The Startup Act 2.0 – What it Means for the Small Business Community

On May 22, 2012, U.S. Senators Jerry Moran, Mark Warner, Marco Rubio, and Chris Coons introduced a bipartisan economic growth plan called the StartUp Act 2.0, which is an extension to the original StartUp Act and JOBS Act. This act works to fix the problem of the United States’ inability to retain foreign entrepreneurs, who could possibly create jobs by starting businesses.

Many foreign students come to the United States to receive their education and after graduation head back to their home country. Even though some may want to head home after graduation, others want to stay in the states to pursue their business ventures, but are unable to due to immigration laws that require them to leave. The arbitrary caps, for example, require almost 200,000 American-educated degree holders to leave the states. Once they leave, they take their knowledge and skills to develop competing businesses in other countries.

Imagine if we trained men and women at our Air Force and Naval Academies, equipped them with the tools they need to lead and succeed in battle, and then kicked them out of our country to join other militaries? In effect, that is what we are doing when we train the world’s most talented immigrants to innovate and start businesses at our great universities, then send them off to start companies in China, India, and South Korea.

The StartUp Act 2.0 was created to change these restrictions and keep highly talented people in the United States.

“To get America’s economic engine roaring once again, entrepreneurs – both American and foreign-born – must be free to pursue their ideas, form companies in the United States, and hire employees. Startup Act 2.0 will create jobs for Americans by creating a circumstance in which entrepreneurs can succeed and the United States can win the global battle for talent.”

What this means for the Small Business Community

Job Creation: With more immigrants staying to open U.S. based businesses there will be more jobs created in America.

Funding: If this bill is passed, investors tax rate will be lowered, so as to encourage a five-year or longer financial commitment to startups. In addition, universities can receive funding to bring cutting-edge research to the marketplace.

Tax Credit: Startups that are less than five years old and make less than $5 million can benefit from the research and development tax credit.

Specific StartUp Act 2.0 Provisions

Creates a STEM Visa for graduate and Ph.D students in science, technology, engineering, or mathematics.

Creates an Entrepreneur’s Visa for legal immigrants.

Eliminates per-country caps for employment-based immigration visas.

Makes permanent the exemption of capital gains taxes on the sale of startup stock held for at least five years.

Creates a targeted research and development tax credit for young startups.

Uses existing federal R&D funding to support university research initiatives.

Requires all government agencies to conduct a cost-benefit analysis of all proposed “major rules” with an economic impact of $100 million or more.

Directs the U.S. Department of Commerce to assess state and local policies that aid in the development of new businesses.

What do you think? Would this provide a positive direction for our country?